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The U.S. Securities and Exchange Commission (SEC) is reportedly probing crypto exchange Coinbase, a publicly-traded company it oversees, on suspicion it allowed U.S. persons to trade unregistered securities. Bloomberg reported Monday that the regulator was investigating some of the tokens listed on the exchange. The SEC alleged last week that seven cryptocurrencies listed on Coinbase were securities in an unrelated insider trading case brought against a former product manager at the exchange. SEC Chair Gary Gensler has previously also said he believed that Coinbase should register Cryptos on the lines of the national securities exchange, given some of the cryptocurrencies it has listed.
The reported investigation was established at an earlier date, before another probe which resulted in the SEC filing insider trading charges against a former Coinbase product manager, his brother, and his friend. These actions allowed them to profit by more than US$1.1 million, according to the SEC.
In this probe, the SEC alleged that nine of the cryptocurrency assets listed on Coinbase's platforms are securities, the cryptos in question being AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, and KROM. However, Coinbase's chief legal officer, Paul Grewal, has officially denied these allegations, claiming that the exchange does not list securities. Grewal also filed a petition to the SEC to issue clear rules regarding digital asset securities on July 21.
Previously, the SEC said that it does not consider Bitcoin (BTC), the industry's largest cryptocurrency, to be a security, nor did the agency classify Ethereum as such. The SEC, however, weighed in on other cryptocurrencies, such as Ripple's XRP, slapping the creators of the seventh biggest digital asset by market cap, with a US$1.3 billion lawsuit in December 2020. Gary Gensler, the SEC chair, also argued last year that Coinbase may be breaking the law by listing "dozens of tokens that might be securities."
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